DSW 2012 Annual Report Download - page 22

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19
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
This management’s discussion and analysis of financial condition and results of operations contains forward-looking
statements that involve risks and uncertainties. Please see “Cautionary Statement” on page 1 for a discussion of the
uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction
with our historical consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form
10-K. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for
future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of
various factors, including but not limited to those listed under “Risk Factors” in Item 1A of this Annual Report on Form 10-K
and included elsewhere in this Annual Report on Form 10-K.
Executive Summary - Fiscal 2012
During fiscal 2012, we generated a 5.5% increase in comparable sales and an 11.5% increase in total sales for the fifty-three
week period. The fiscal 2012 comparable sales increase is based on a fifty-two week period and is in addition to a comparable
sales increase of 8.3% for the same period last year. The increase in comparable sales was a result of an increase in traffic,
conversion and average unit retail. All merchandise categories reported a positive comparable sales performance, with no single
category driving the overall sales increase.
In fiscal 2012, DSW's merchandise margin rate decreased 60 basis points as a percentage of net sales over fiscal 2011 as a
result of increased markdowns. Overall gross profit as a percentage of net sales decreased 20 basis points. Occupancy leverage
partially offset the decrease in merchandise margin rate due to increased average store sales and the 53rd week while
distribution and fulfillment expenses were essentially flat.
We have continued making investments in our business that are critical to long-term growth. In fiscal 2012, we purchased
our corporate office headquarters, our distribution facility and a trailer parking lot for $72 million. Excluding the purchase of
those properties, we invested $99.8 million in capital expenditures compared to $76.9 million during fiscal 2011. Our capital
expenditures during fiscal 2012 were primarily related to opening 39 new stores, the distribution center reconfiguration,
expansion of the fulfillment center, store remodels and business infrastructure. We plan to open 25 to 30 stores in fiscal 2013
and believe we have the potential to operate 450 to 500 stores.
As of February 2, 2013, we operated 364 DSW stores, dsw.com and shoe departments in 260 Stein Mart stores, 83
Gordmans stores and one Frugal Fannie’s store. We renamed our former leased business division in the third quarter of fiscal
2012, and it is now known as the Affiliated Business Group to better reflect the broader range of retail capabilities and formats
that we can offer to potential partners. DSW has two reportable segments: the DSW segment, which includes the DSW stores
and dsw.com sales channels, and the Affiliated Business Group segment.
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